Case Briefs

In Hangarter v Provident Life & Accident Insurance Co., 2004 U.S. App. LEXIS 12841 (9th Cir. June 25, 2004), the Ninth Circuit addressed an insured's claim for coverage and bad faith under a disability policy. The insured alleged that the insurer improperly terminated her disability benefits based upon the opinion of medical examiners and claims investigators that the insured was not “totally disabled.” The insured obtained a verdict for breach of contract and bad faith. The insurer raised numerous issues on appeal, including arguments that the jury erred in finding it liable for bad faith and that the trial court erred in admitting expert testimony regarding bad faith and in permitting an award of future benefits under the policy.

The Ninth Circuit rejected these arguments. While the court agreed that when there is a genuine issue of liability under a policy, an insurer's denial of coverage might not be unreasonable, it held that “a jury's finding that an insurer's investigation of a claim was biased may preclude a finding that the insurer was engaged in a genuine dispute, even if the insurer advances expert opinions concerning its conduct.” The court noted that an insurer's bias may be shown through multiple factors, including that the insurer “may have misrepresented the nature of the investigatory proceedings,” that the insurer's experts “were unreasonable,” or that the insurer “failed to conduct a thorough investigation.” The court noted that there was such evidence, pointing to the fact that the insurer had retained its independent medical examiner 19 previous times, had reached the same conclusion in 13 prior cases, and had advised in the letter retaining the doctor of its position that there were no objective findings supporting disability.